Economy

International Trade

Cyprus’ star performers, pharmaceuticals and halloumi, are about to gain a runner-up in mineral fuels exports, which have leapt to a prominent third place in the ranks of the country’s top exports.

Strategically situated at the crossroads of three continents, Cyprus is the EU’s key trading hub in the Eastern Mediterranean, providing a point of exchange between Europe, Africa and Asia. This unique location coupled with its advanced transport infrastructure, has seen the island become not only a significant domestic exporter, but also an emerging regional trading hub and transhipment centre, with the combined 2015 total export figures (domestic and re-exports) reaching around €1.74 billion and seeing a 20% rise from 2014.

The limited growth potential of the country’s small domestic market means that Cypriot manufacturers have always prized their relationships with their international export partners, and trade has played a crucial role in the development of the economy. Traditionally, around 59% of Cyprus’ trade in goods is with the European Union, with its main export partners being Greece, the United Kingdom, Germany and Italy. For the period January-November 2016, total exports accounted for €1.57 million, 40% of which consisted of exports to EU member states. Exports to Middle Eastern countries came a strong second at €241.9 million. During 2015, total exports accounted for €1.74 million, of which 48% consisted of domestic exports and 52% of re-exports.

High-End Manufacturing

At 69%, industrial products of manufacturing origin make up the largest share of the country’s total exports, and the largest revenue generator by far within this category are pharmaceutical products – accounting for 49%. Other products include cement at 14%, scrap paper and metal at 7%, and telecommunications equipment at 5%. The high proportion of small-to-medium-sized (SME) manufacturing enterprises means that companies have the flexibility both to respond quickly to changes in customer requirements and to adopt new production techniques. The highly educated Cypriot labour force – the island’s trump card – means that new technical skills can be rapidly assimilated, facilitating fast turn-around times.

The adoption of modern technologies has also brought with it quality improvements and longer product shelf-life, while the recent application of more targeted marketing techniques is opening up new customer bases. These factors all contribute to making Cyprus a highly attractive location for international companies seeking to use the island for both production and export purposes.

A growing area of export is in mineral fuels and oils, which jumped from zero in 2014 to €98 million in 2015, following the opening of the VTTV oil terminal in Vasilikos in late 2014. The company uses Cyprus as a terminal, blending its raw material and then exporting it to the rest of the world, but mainly to Lebanon (€28.8 million) and Israel (€16.6 million). Cyprus’ strategic location makes it the first terminal of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with markets in the Middle East and Asia. As a percentage of Cyprus’ GDP, petroleum is only worth 1%, but the industry has tremendous growth prospects with the country’s determination to establish itself as a key energy hub and a bastion of stability and security in the region.

Quality Agri-Business

Cyprus’ agriculture sector has been gaining momentum by offering the international market an ever-expanding range of quintessentially Mediterranean fruits and vegetables. Today, there are more than 30 fresh-produce exporters in Cyprus, the majority of which are also agricultural producers – providing a continuity which helps maintain high standards and effective quality control at every stage of the process. Since EU accession in 2004, both primary and secondary exports have had to comply with stringent European phytosanitary standards and quality thresholds. Agricultural products are an important component of the economy, accounting for some 30% of domestic exports. Potatoes are by far the island’s most important raw export crop, making up 40% of the total raw agricultural products. They are grown in the south-eastern coastal region, which has a mineral rich, red soil and enjoys mild weather, enabling three crops to be grown in the space of a year. The spring harvest is the most important for export purposes, and the different varieties of potatoes are used for direct domestic consumption as well as for the production of crisps. Other fresh produce includes citrus fruit, grapes, melons, vegetables and aromatic herbs, while a number of agrifood products are making headway in the international market, including fruit and vegetable juices, and meat and fish products. Aquaculture products are the third most important produce in Cyprus, in terms of export value. Specifically, these products are sea bass and sea bream and approximately 65% of the total national production is exported to markets in Middle Eastern countries and the USA. The aquaculture sector represents about 75-80% both in terms of volume and value of the total national fisheries production, and the total national aquaculture value for 2015 reached €39.2 million.

Honing the Halloumi Brand

Cyprus’ famous halloumi cheese – made from a blend of goat,sheep and cow’s milk – is perhaps the most internationally renowned of the island’s exports. Distributed to upmarket supermarket chains worldwide, it has unsurprisingly become a runaway success and recently became the second largest export for Cyprus. The name ‘halloumi’ is now registered in the European Union as a Community Collective Trade Mark, meaningthat no other product can be marketed within EU borders under this name. It is also registered as a Certification Trade Mark in the UK, US and Jordan, and will soon be registered in other Middle Eastern countries too. The renowned cheese will also be registered as an EU Protected Designation of Origin (PDO), which is set to boost the product and its brand appeal, as well as increase dairy production.

A Tradition of Viticulture

Cypriots know a thing or two about wine – they’ve been in the business since antiquity and boast some of the oldest grape varieties in the world. Recent archaeological excavations revealed that wine was being produced on the island – and probably exported elsewhere in the Mediterranean – as long ago as 4,000BC.

The wine industry has seen much development over the last few decades, with vineyards upgrading and hiring talent to perfect their products to meet consumer demand and better compete in this tough sector. After some difficult years, when the small scale of its production base made it difficult to penetrate big overseas markets, the Cypriot wine industry has now successfully repositioned itself in response to international market trends.

Today more than 40 small, regional wineries situated in the hillside villages of the grape-growing regions, produce a variety of characterful wines, many of which are blended with established foreign varieties of grape. The island’s four big wineries – ETKO, KEO, SODAP and LOEL – have also adapted, replanting their vineyards with new international varieties and rediscovering old indigenous ones. Cyprus is now increasingly recognised as an exporter of smaller quantities of a high-quality product for the discerning consumer.

A Variety of Classifications

Accession to the EU in 2004, necessitated new legislation to classify the wines produced on the island. Four different wine regions have been designated as producing their own unique wines with controlled appellations of origin. In each case, different proportions of indigenous Cypriot red grapes such as Maratheftiko, Ofthalmo or Mavro, or the white grape Xynisteri, are blended with smaller quantities of specified foreign varieties such as Cabernet Sauvignon, Cabernet Franc, Syrah or Merlot.

Exporting the Cypriot Services Sector

The competitive and varied Cypriot services sector is one of the island’s greatest strengths. It ranges from travel and tourism to legal, accounting and business support services, from banking and insurance, to shipping and shipmanagement, from education and healthcare to information technology and software development. The government views the development of this sector, and of the island’s growth potential as an international business centre, as a strategic priority. To this end, the Chamber of Commerce and Industry (CCCI) regularly organises seminars to promote selected elements of the Cypriot services sector to targeted markets.

A 21st Century Trading Hub

Cyprus’ logistics providers offer a full range of regular and customised services to support the import and export of goods by both Cypriot and foreign companies to and from the EU, as well as internationally. Cypriot exports are further supported by an excellent transport infrastructure. The island is served by over 100 shipping lines, connecting it to all key ports and destinations worldwide. In addition, two international airports guarantee the fast and efficient transport of goods, ensuring Cyprus remains one of the most attractive bases for logistics companies in the region. In addition, Cyprus’ status as a European and regional support hub for firms doing business in the region means that companies can take full advantage of its services, which include warehousing, headquartering, high-tech repair and servicing centres, along with software development and testing facilities. Cyprus-based enterprises also benefit from numerous government-sponsored incentive schemes, including the creation of industrial parks and free industrial zones, designed to encourage the diversification and expansion of manufactured exports.

A Partner of Choice

The country’s Ministry of Energy, Commerce, Industry and Tourism cooperates closely with the CCCI and the Employers and Industrialists Federation (OEB) in targeting countries considered to have strong potential as export markets. Efforts by the government and the private sector to open new and previously untapped trade markets are also beginning to pay off. Cyprus and China recently initiated a joint protocol for the export of Cypriot dairy products. It established public health and an animal welfare standard in relation to Cypriot milk products –soon to be exported to China – and is likely to spearhead an increase in the export of other Cypriot food products to the People’s Republic of China.

Cyprus-based exporters may also be about to benefit from the selective easing by Russia of its embargo on EU imports. Indications are that Moscow is considering a relaxation on trade restrictions for products exported by Cyprus, Hungary and Greece. The Kremlin originally imposed the ban in response to the EU’s imposition of trade sanctions, following Russian action in Ukraine, thereby denying many European food manufacturers access to the vast Russian market. The total volume of Cypriot exports originally affected by the embargo was around €13.5 million, including an estimated €10.7 million of citrus products, along with vegetables, dairy products, fish and fruit.

Transhipment Centre

Cyprus has rapidly established itself as major transhipment centre and is increasingly important to manufacturers seeking to build up European, Middle Eastern and North African export activities. It re-exported €907 million worth of goods in 2015, a jump of 27% on the previous year, primarily to Ireland, Greece, the UK and Egypt. The creation of free-trade zones, exempt from EU tariffs and customs legislation, at the ports of Larnaca and Limassol has undoubtedly contributed to convincing overseas businesses to view the country as a significant transhipment centre. Also, the recent commercialisation of Limassol Port, with major investment into upgrades and efficiency has bolstered the future prospects of Cyprus as a major trading hub. The island’s healthy economic growth – expected to reach around 3% in 2017 – and its unique position along key Mediterranean trade routes, is strengthening Cyprus’ reputation as an enticing location and provider of noteworthy competitive advantages for companies to export their products to international markets.

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